Higher insurance premiums likely

An Indiana couple who wrote to me a few weeks ago has experienced the ups and downs of Obamacare, and they wanted me to know about one downside they now face---a monthly premium of $836.

“No one should have to pay those high premiums unless you’re considered high class, and we aren’t,” the woman said.

The couple-she is 59 and he is 62-are self-employed, and their income fluctuates. At first the Affordable Care Act was, a “godsend,” the woman told me. Before they signed up for Obamacare, they were paying almost $1,000 a month for insurance coverage. Then they bought an Obamacare policy, a Gold plan Anthem sold on the Indiana shopping exchange. It was a good policy with a relatively low deductible, low copays and coinsurance costing about $1,435. Best of all, they qualified for a subsidy.

Their income that year was low, between $23,000 and $28,000. That entitled them to a subsidy of around $1,200, leaving them to pay only about $235, which they could easily swing. Recall that subsidies are intended to help those with the lowest incomes, and because their income was low, their subsidy was generous.

Then, as the economy started to improve, their income went up, but their subsidy went down. As they’re supposed to do, the family regularly reports income changes to the government so they don’t get stuck with a gigantic bill at the end of the year, money they would owe for subsidies they were not entitled to.

Now the couple’s income is about $45,000. In May, Anthem notified them the policy still costs about the same, but their subsidy had dropped to around $600. They would have to pay the remaining portion of the premium, about $836.

Most likely the couple will see a premium increase for 2017. Preliminary rate requests to state regulators have been in the high double digits. As incomes rise, many families will be will be squeezed by a combination of lower subsidies and higher premiums.

Premiums are rising in the so-called individual insurance market where some 24 million Americans get their coverage. About half buy policies on the Obamacare shopping exchanges and receive subsidies, but the other half must shop on the open market and get none. They will be hit particularly hard.

In Colorado, for example, some insurers are asking for average increases as high as 35 or 40 percent. Texas Blue Cross Blue Shield wants an increase averaging nearly 60 percent. Blue Cross Blue Shield of Nebraska is seeking an average increase of almost 35 percent, and in Indiana the couple’s carrier Anthem is asking for hikes averaging between 20 and 41 percent.

Not every policy will have premiums that high, of course. Increases may apply only to certain policies in certain areas, and regulators are likely to lower many of the companies’ requests.

But this year insurers are making a strong case they need more money. Some say that since they have to cover everyone no matter how sick those people are, they’ve been hit with a lot of claims from people who have costly medical needs.

Federal money called for by the Affordable Care Act to help carriers adjust to the unknowns presented by the new law has gone away. The American Academy of Actuaries points to another factor: increasing costs for prescription drugs, increases the academy says continue to outpace costs for other medical services.

The Academy also notes, “There may be less price competition when fewer health plans participate.” During this fall’s open enrollment season for 2017 insurance, more than 650 counties, mostly rural, will have only one carrier offering coverage. That’s up from only 225 counties in that situation last year, according to a Wall Street Journal report.

Why the trend? A study by one health technology firm found that rural residents have significantly higher medical costs than those living in urban areas, making insurers gun-shy about selling in rural counties.

What can families do? They can buy cheaper silver and bronze policies that often come with narrow provider networks and high deductibles, high coinsurance and high copays.

The Indiana couple is not willing to do that yet, but they are frustrated by their high premiums and the prospect of even higher ones. The man has just applied for early Social Security benefits. “It’s going to take every bit of my Social Security to pay for my health insurance,” he told me. He’ll have to use other income, too. “I’m going to have to save a year ahead to afford it.”

He’s lucky he can.

How are you going to pay for expected premium increases? Write to Trudy at trudy.lieberman@gmail.com.